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Title: FSP: Unauthorized Redemption and Trafficking in Program Benefits

Abstract: This interim final rulemaking is being developed in response to reports of incidents in which an authorized retailer has redeemed a Food Stamp Program participant’s program benefits without the knowledge of the participant. In addition, this rule serves to modify actions that may be taken against some retailers found to be trafficking in program benefits.
The Food Stamp Act, as amended, provides for the prosecution of any unauthorized issuance, redemption, use, transfer, acquisition, alteration or possession of coupons, ATP cards, or other program access device by an individual, partnership, corporation, or other legal entity to prosecution under sections 15(b) and (c) of the Food Stamp Act or under any other applicable Federal, State, or local law, regulation, or ordinance. Stealing benefits from a recipient by redeeming program benefits without their knowledge would be an offense that could be prosecuted under the current statute. However, program regulations do not provide clear administrative penalties for such thefts of Food Stamp Program benefits. In the absence of prosecution, there are currently no administrative actions that may be taken against such entities for stealing the program benefits of recipients. In addition, it has been determined that this activity does not meet the definition of trafficking as reflected in current Food Stamp Program regulations.
This interim final rulemaking will add a simple amendment to current regulations to provide for the establishment of an administrative penalty for such violations of the Food Stamp Program equivalent to the penalty for trafficking in program benefits. Authorized individuals, partnerships, corporations, or other legal entities found to have stolen benefits from program recipients without their knowledge or complicity shall be disqualified from program participation permanently. Any firm charged with such a violation would be provided with the opportunity for judicial and administrative review of the disqualification action as provided for in current program regulations.
In addition, in response to ongoing investigations by the Office of Inspector General of the USDA and the recommendations of the Department of Justice, this interim final rulemaking puts in place a variation on current trafficking sanctions. Current legislation and regulations require immediate permanent disqualification for trafficking, subject to appeal. However, regulations provide a 10-day waiting period during which a firm may reply to the charges of trafficking as well as request and provide justification for a trafficking civil money penalty in lieu of permanent disqualification.
There have been documented cases in which a preponderance of evidence indicates that there is a likelihood of continuous and flagrant trafficking activity that would take place if certain firms were permitted to continue in operational status during that 10-day period. In response, this interim rule provides for immediate termination of POS device operations for Food Stamp Program transactions in certain cases. This immediate termination would take place at the direction of the Office of Inspector General of the USDA and/or the Assistant United States Attorney’s Office serving the appropriate geographic locale. At the direction of either or both of the aforementioned parties, the Agency would take immediate action to terminate the redemption of Food Stamp Program benefits by that firm if there is a finding of egregious trafficking activity. The firm will receive all other due process considerations currently provided in the program regulations; however, its ability to conduct Food Stamp Program business will be immediately suspended. (06-001)